Tax rates and emissions reductions targets - AM Agenda

KIERAN GILBERT: With me now is the Shadow Assistant Treasurer, Andrew Leigh, and also Parliamentary Secretary for Foreign Affairs and Trade, Steve Ciobo. Gentlemen, good morning. Steve, after the Budget it looked like it was a more solid performance, things had started to turn around. But now the trend is back away from the Government. That's got to be a bit of a worry as we head back into the spring session of Parliament?

STEVE CIOBO, PARLIAMENTARY SECRETARY FOR FOREIGN AFFAIRS AND TRADE: Kieran, in shocking news, I'm going to tell you of course we make policy decisions based on what we believe to be in Australia's national interest. None of us get particularly excited about polls that go up, polls that go down, there are polls done almost every second day. As far as I'm concerned, as far as the Government is concerned, we were elected to do a job and that was to stop the boats, to abolish the carbon tax, to make sure that as a nation we get our finances under control and every single day we work toward doing that. Our $89 billion announcement to make sure that both our defence industries and South Australia are on a solid footing going forward is an example of that. And we continue to pursue economic reform that is in Australia's best interest.

GILBERT: Alright now on the Speaker. We know that Bronwyn Bishop has departed. Who is likely to replace her this morning, I am hearing Tony Smith is firming as favourite, although it probably will be pretty close this morning?

CIOBO: I guess they can watch Sky News and get all the latest but the fact is we'll know after party room. We're really lucky because we've got some really good candidates. Andrew Southcott and Tony Smith as well as veterans like Russel Broadbent and of course Philip Ruddock and of course a fellow Queenslander in terms of Ross Vasta. They're all really good people. Ultimately the party room will have its say in less than an hour, in less than half an hour actually and we'll get to see what the results will be then.

GILBERT: The Liberal MPs voting from 9am local time, so a bit over 20 minutes away that the meeting gets underway. Andrew, I think one thing we can all agree on is that the new Speaker will be less partisan than their predecessor.

ANDREW LEIGH, SHADOW ASSISTANT TREASURER: It's hard to say, Kieran, whether we can end up with another Speaker that throws out 393 Labor MPs and just 7 Coalition Members of Parliament. We really think it's important that the new Speaker is holding Government Ministers to account. Question Time has its limits but it is the key opportunity for Australians to see ministers held to their promises. The past Speaker, I don't think, did that effectively.

GILBERT: What about these individuals you see this morning, Tony Smith, Andrew Southcott and Russell Broadbent – what do you make of these individuals?

LEIGH: These are all solid people which Labor believes we could see a more workable Parliament than we've had in the past.

GILBERT: Let's look at this comment today by Joe Hockey, a piece he's written in The Australian talking about the competitiveness of our tax rates. This is not a scoop to anyone really, that our income tax rates are too high and they're going to increase in terms of bracket creep over the next few years. When you talk about tax reform of this magnitude and you rule out the GST for example, as Labor does, how do you deal with this issue of competitiveness of our tax rate? If you look at John Key for example, New Zealand lifted their rate to I think 90 per cent of their economy, 15 per cent GST, they've got a top tax rate of 33 per cent.

LEIGH: If you take all taxes, total government as a share of the economy in Australia is about a third. In the OECD average it's closer to 40 per cent, in Scandinavia it's closer to 50 per cent. We're down the bottom of the advanced world with a size of Government similar to Korea or the United States.

GILBERT: But not when it comes to income tax?

LEIGH: No, income tax is a higher share of our total tax mix because GST is lower. If you look at the particular income tax rates paid, they sit at around the OECD average. But we should always be making sure that the Government is as lean as possible to do the job that it needs to do. The thing is though now if you're going to be cutting away the tax base, you've got to identify which services are going to be cut. You know, if Steve thinks we should cut taxes then he needs to identify which services are being cut.

GILBERT: Or alternative, revenue streams like the GST, the consumption tax?

LEIGH: Indeed. As Milton Friedman put it, to tax is to spend, so if you're going to be cutting back on taxes you must be cutting back on spending - debt kept the same.

GILBERT: Or you find other revenue streams? Other taxes, more efficient taxes. The point that Joe Hockey makes is that those who are being taxed higher levels, in particular with bracket creep - labour is mobile, people can leave.

CIOBO: Exactly, labour is as mobile as it has ever been. It seems to me if you just listen to Andrew's comments, you can hear the argument being put forward that Labor is softening the ground. Basically telling Australians: look, you’re low taxed now so more tax isn't going to hard. That's basically what Andrew just said. He said Australia is in the bottom third of countries; there's a clear divergence here between the two major political parties. The Coalition is about pushing for less tax, more jobs and a more competitive economy. The Labor Party has an aspiration for Australia to leave the bottom third of countries and move towards the Scandinavian countries where it's close to 50 per cent tax rates. That's not our vision, that's not the Coalition's approach.

LEIGH: No one is arguing that, Steve. I am giving the facts, I know they're uncomfortable.

CIOBO: The Labor Party is making a comment that they think that more tax is the way to go and we know that they must believe in more tax.

CIOBO: We know that Labor must believe in more tax because the announced policies that Bill Shorten and the Labor Party have put out there represent something like $50 billion of extra spending and so clearly, Labor has a adherence to more in order to pay for more spending and that's really the difference.

GILBERT: Ok, I'll get to you Andrew on that and you can have a direct response to this. But the point, I guess, is the Treasurer, Mr Hockey, saying the income tax rates are uncompetitive and will become more uncompetitive over coming years with bracket creep taking with more people into the higher bracket of the percentage tax. How do you deal with this? It's fine to float this but he's the Treasurer, what's the response?

CIOBO: We're going to do a couple of things. One of the most important things that we did as a new Government was to reduce reckless spending. Everybody knows with Labor we had completely failed schemes. Taxpayer money just flushed down the toilet. $900 cheques whether people were basically alive or dead. We, of course, saw the failed Pink Batts Scheme and we saw all manner of announcements, the Cash for Clunkers scheme. Labor was coming out with these 'you beaut' ideas off the back of napkins, throwing billions of dollars of taxpayers money out the door. So we got that under control and now we want to make sure that we reduce the level of income tax over time. Because as the Treasurer makes clear, the fact is that the top 10 per cent –

GILBERT: But how do you do it? It's fine to say it but that's not the only way you can do it, surely. Just to deal with bracket creep it's going to cost $25 billion over the forward estimates. It's a lot of money just to return bracket creep.

CIOBO: It is.

GILBERT: That's even before you get competitive.

CIOBO: This is the reason we've got to make sure that we focus on making Australia more productive. This is the reason –

GILBERT: Isn't it time that our leaders take Mike Baird's lead and have some courage to say that we've got to have widespread tax reform, including the consumption tax?

CIOBO: Kieran, we are. We have that courage, we've taken on board that we need to have tax reform, that's the whole reason we have the taxation white paper out there. We want to get the best ideas, we want to be able to run them through the Government mill so to speak, to look at what we can do to put Australia on a more competitive, more sustainable and more productive footing into the future. That's the future for taxation.

GILBERT: Ok so what's Labor's alternative? Because lifting the Medicare Levy is not a productive increase that's actually going to increase the rate of income tax. How does that work?

LEIGH: We've engaged heavily on the process of tax reform. On superannuation you have the superannuation industry, the head of the Treasury, every respectable business group I speak to, saying that the superannuation tax breaks aren't fair and aren't sustainable. Labor has put forward a plan to address those which has been knocked back by the Coalition. On multinational taxation we've said that we believe it's fair for some of the world's largest companies to have egregious tax breaks taken away. And when Steve is talking about the reckless spending side, let's talk about the Direct Action Plan which has so far given $2.5 billion to polluters.

GILBERT: But your tax response, and I know it's constructive and all that that's fine, you can say that and I guess it's hard to criticise some of the elements like the multinational thing which the Government is also pursuing, that's not enough. If you're talking about $25 billion just to return bracket creep you're going nowhere near it.

LEIGH: We've said we're happy to engage with a constructive discussion, Kieran. The Government says it will only put out tax ideas which have bipartisan support. We've said we're willing to pursue ideas and argue through reform. We've copped a bit of stick for saying we're open to a conversation around negative gearing, another debate which the Prime Minister has insisted in closing down. But there is also the spending side. Steve is also right to talk about the spending side, the $2.5 billion given out through Direct Action, according to the Climate Institute, will see us fail to meet our 2020 carbon targets.

GILBERT: We've only got about two minutes left but I want to get both of your thoughts on this debate right now. The Daily Telegraph reports that Labor's plan for 40 to 60 per cent reductions by 2030 is going to cost $600 billion, is that what the Government's argument is here?

CIOBO: Well yeah, we've seen the modelling coming out from the Labor Party and the modelling around the carbon tax that Labor introduced. I mean what's the scariest part about this is not that it's going to cost the Australian economy more than $600 billion, not only is it going to drive down real wages by more than 6 per cent but Labor's aspiration off the back of their National Conference is to go even higher than that which means that the impact will be even more significant. Australians will really have a clear choice, between a Labor Party that's about more tax and about bringing back literally the world's biggest carbon tax that will shave real wages and harm our economy verses the Coalition's proposal.

GILBERT: Ok, Andrew your take on this modelling that's been reported on this morning.

LEIGH: Kieran, I was the conference spokesperson for the Labor Party's conference and I can tell you that Steve is absolutely wrong, as is The Daily Telegraph, as is Greg Hunt. The conference did not pass a motion on emissions reduction beyond 2020. We did commit ourselves to meeting the two per cent global warming target. But let's be honest, the EU, China, the United States and the Coalition themselves have also committed to that target. This modelling that's apparently been released runs to some 300 pages, we haven't seen it, we know it's old, produced by a Department that no longer exist and doesn't take into account the fall in electricity demand and the increase in efficiency of renewables. It's really just an attempt by the Government to distract from the fact that they'll be coming out this week with emissions targets for 2030 which are likely to fall well short of what the world expects.

GILBERT: We're expecting that Cabinet will meet today and new targets tomorrow, very quickly Steve Ciobo, do you accept the Climate Institute’s survey, this Galaxy poll which shows that two thirds of Australians want the Government to be doing more?

CIOBO: The key here, Kieran is to get the balance right. The balance between achieving good reductions in CO2 emissions but by the same token, safeguarding Australia's jobs and prosperity and that's where Labor got it all out of whack. Because they were happy to axe jobs, happy to axe prosperity in order to pursue targets. We're getting the balance right.

GILBERT: Gents, appreciate it. Steve you've got to get to that party room and choose a speaker.